Building height fight brews in this historic downtown

An empty lot on one of the most high-profile corners of a historic suburban downtown is once again a focal point in an ongoing tug-of-war between redevelopment and preservation.

Excelsior city officials must soon decide whether to greenlight construction of a mixed-use building that could further elevate the western suburb’s status as an upscale Twin Cities destination. But some critics fear the project will permanently alter the main street’s retro small-town vibe.

The lot has been vacant for 15 years since the demolition of a former Pizza Hut. Earlier development proposals for the site have failed to materialize. A controversial four-story boutique hotel the city approved in 2013 was “ultimately too expensive to build” and never completed, said City Manager Kristi Luger. Last year, city officials rejected another plan for a four-story hotel because of its height.

That 2024 proposition was from Wayzata-based Mithun Cos., which is also helming the 2025 plan. Mithun is currently constructing Wayzata Gateway, a multi-use development with apartments, townhouses and businesses at a busy intersection in the expensive suburb. In Excelsior, the proposed three-story building with apartment, restaurant and retail space would incorporate part of a neighboring 80-year-old movie theater, closed since COVID-19.

But it would also exceed the two-story height limit in the historic district. That area, including the building’s potential location on Water Street, has been on the National Register of Historic Places since 2021.

“[It] looks a lot more like Wayzata than it does Excelsior,” city Planning Commission Member Jeff Malsam said of the development that risks “really changing the whole character of the street.”

Should the City Council approve the development this summer, the building could open in fall 2027, per Matt Mithun of Mithun Cos. But whether to welcome the $35-million-to-$40-million complex is a tough decision in a 2,400-strong community proud of its quaint architecture. The area has also gentrified in recent years, becoming home to boutiques and trendy restaurants that attract day-trippers and affluent new residents alike.

Even beyond downtown, Excelsior’s oldest residential neighborhood is also echoing that change. Large, expensive houses have replaced many of the older, more modest homes. So far this year, the median home sale price in Excelsior is close to $1.2 million, up more than 140% from 10 years ago, according to the St. Paul Area Association of Realtors.

Part of the scrutiny on Mithun’s proposed building and others before it has to do with the visibility of the lot’s location. A building there would face the city’s main drag, at the intersection of Water and Lake streets. It’s near the Commons, a 13-acre park next to Lake Minnetonka, and across the street from the Port of Excelsior’s public docks and charter cruises.

An outdoor public “porch” with seating facing the lake is part of the new proposal, in addition to the brick building’s 40 or so apartments above restaurant and retail space.

Restoring the theater would be the biggest public benefit, Mithun said. The proposed building would encompass the site of the Excelsior Dock Cinema, and construction would demolish part of the theater but preserve its second-story auditorium.

St. Paul-based FilmNorth plans to show movies four days a week there, with the remaining three days available as a venue for community gatherings and presentations. Mithun plans to attach a classic marquee to the front of the building, replacing the current flat sign.

Without the project, Mithun said, the theater would be unusable, partly because of water damage. He also said small independent theaters have struggled since the pandemic with competition from streaming services.

Other community benefits, per Mithun, include $500,000 toward local projects. Those include the porch plan for the building as well as water main repairs, stormwater treatment, public restrooms, an improved pedestrian crossing to the Port of Excelsior, fireworks and street beautification projects like holiday lights and boulevard tree plantings.

Members of the city’s Planning Commission, though, still question if that amounts to enough “public benefit.” That intangible element is a requirement for granting the project more design flexibility than zoning restrictions would otherwise allow.

Excelsior’s historic district showcases mostly one-and two-story brick, stucco and stone structures built between the 1880s and 1950. Three-story and taller buildings have been prohibited since 2022.

There are some newer three-story buildings downtown but outside of the historic district, including Excelsior Shores, an apartment complex on Lake Street next to the proposed building. Some buildings within the historic district are two stories but are almost tall enough to be three, Mithun said. He pointed out one that’s 37 feet. Mithun’s project would be 39 feet, 8 inches tall.

Making his building shorter, Mithun said, wouldn’t be financially feasible.

“It really comes down to the economics. You just can’t build a two-level project at that assessed value,” he said, adding Hennepin County has valued the property at $2.75 million.

At a June 23 meeting, Planning Commission Member Heather Johnson said she worried allowing a three-story building would “set a precedent.” But fellow member Mitchell Day warned prohibiting taller options could “have huge consequences.”

Other than height, commissioners expressed reservations about the development’s limited parking. The plan includes a 70-space underground parking garage for apartment residents and up to 24 additional surface spots.

The Planning Commission has not yet decided to recommend approval of the project to the City Council. Members set a special meeting for Monday to revisit the issue, but the final decision is up to the council. The council is expected to discuss it July 21 and is not obliged to follow the commission’s recommendation.

The city has received at least eight letters and emails favoring the proposal, including from the owners of neighboring Excelsior Shores. None of the written messages submitted to the commission late last month opposed it.

“The resounding response to our project has been supportive,” said Mithun, adding response at public meetings held to explain the project have also been largely positive.

Excelsior resident Charles James owned the lot from 1976 until selling it to Mithun in 2023 for $3.5 million. He’s a fan of the proposal and considers the city’s height restrictions “wrong, unconstitutional and unfair.”

Should the development fall through as others have before it, Planning Commission Member JoAnna Hansen made clear what the fallout would be: “Having an empty grass lot for the foreseeable future.”